Troubled Kabul Bank to split amidst scandal

Kabul: Afghanistan's troubled Kabul Bank is being split into a "good bank" and a "bad bank" in a desperate bid to save it from collapse, the central bank said.

The announcement is the latest twist in a scandal involving figures close to President Hamid Karzai — including one of his brothers — which has highlighted chaos and corruption in war-torn Afghanistan's financial system.

It came as the International Monetary Fund (IMF) considers a new financial assistance plan for desperately poor Afghanistan. The IMF has indicated it is conditional on the Kabul Bank crisis being resolved.

The bank had to be taken over by Afghanistan's central bank after claims that former executives granted themselves off-the-book loans worth a reported $900 million.

Abdul Qadir Fitrat, governor of the central bank, Da Afghanistan Bank, told an invited audience on Wednesday that Kabul Bank would be split into "good" and "bad".

This should mean that ordinary people's deposits are protected in the "good bank" while the "bad bank" will attempt to recoup the hundreds of millions of dollars of bad loans.

"The good part includes people's deposits, normal loans, its branches... all of which will continue as a good and clean bank," Fitrat told reporters.

It is set to be owned by the Finance Ministry for three months before being sold off, the governor said.

He added: "The bad part includes loans to the shareholders and some other individuals that were given out in contradiction of banking regulations.

"These loans will be reclaimed and given to the central bank to repay its loans to Kabul Bank."

The bank was founded in 2004 by Sherkhan Farnood, a leading international poker player, and other co-owners included Mahmoud Karzai, a brother of the president.